Construction Spending, ISM Index, ADP Payroll, Mortgage Purchase Applications

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses construction spending, the ISM index, ADP payroll figures, and mortgage purchase applications.

  • A stream of fresh economic data appears on the first day of every month. Here is a quick summary of today’s data and what it may mean to you.
  • Construction spending on residential buildings rose, but activities on new commercial buildings and government-funded projects declined. This means there is and will be more construction job opportunities for homebuilding.
  • The manufacturing sector is barely holding on. The ISM index, which measure activity in this sector, fell for the second consecutive month. The latest reading of 50.7 is only marginally above the critical 50 mark, which separates expansion and contraction. This means job gains in the manufacturing sector will slow or even possibly reverse in a few months.
  • ADP, a company that processes payroll checks for many firms, revealed 119,000 net new jobs in April in the private sector. This data has smaller coverage than the official employment data from the government, which is scheduled to come out this Friday. This likely means that official job gains will be comfortably positive, but the job creation pace is still not strong enough to meaningfully bring the unemployment rate down.
  • Mortgage applications for a home purchase fell slightly, though are up by 13 percent from one year ago. Applications for refi rose and are up 31 percent from one year ago. This means that home buying demand remains strong, but mortgage brokers need to prepare for a potentially sharp decline in mortgage refi activity in 2014.
  • Finally, the big cities are creating jobs. The L.A.-Santa Ana region added 116,000 net new jobs in the past 12 months. The Greater New York City area put 106,800 new people to work. However, La-La land and the Big Apple have huge populations so the job growth rates were only in line with the national pace. Dallas and Houston are the true stars. Dallas added 101,000 net new jobs in the past 12 months, while Houston put 102,300 more people to work. These Texas job growth rates were triple the national job growth rate. This means there will be greater housing demand per each REALTOR® in Texas versus other parts of the country.

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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